Many small businesses miss one of the most important parts of building a financially stable business: budgeting.
Budgeting may not be sexy, but understanding what income and expenses you can expect in the near future is essential to your business, especially if you find yourself struggling with cash flow. It’s time to start budgeting for 2019 and it’s best to begin by taking a look at the current year.
What was your average monthly revenue and expenses in 2018?
While you can’t rely on that information for 2019, it gives you a baseline to start from. Make a note of where all your income came from. Will recurring revenue continue next year? Did you have more one-off income sources in 2018? Really evaluate where your business is so far in the year.
Next, compare 2018 to 2017.
Take a look at last year’s income statement and compare it to the current year. Is your business growing? Shrinking? Make sure you take a look at your tax situation as well. Changes in the tax code will affect most businesses, so it’s not a bad idea to reach out to your accountant to get their opinion on what your tax liabilities might be.
Now, what’s coming up in 2019 for your business?
Do you have any big projects coming up?
Launching a new product or service can result in an influx in revenue, but it usually takes an investment to get it off the ground. Consider how much it will cost to get the new project up and running, and how long it will realistically take to see a profit.
Any big expenses in 2019?
Maybe your computers are slowing down and becoming obsolete, or your company vehicle is coming up on 100,000 miles. Or you’ve planned to attend several conferences in 2019, so your travel expenses will be much higher than in 2018. Take a hard look at what expenses are coming up.
When is the slow season for your business?
It varies based on your industry, but most businesses experience some kind of slow season. Understanding when your revenue will dip will help you know how much to stash in the bank during the busy months, so you can breathe easy during those slow months. You don’t want to be surprised in July when revenue has flatlined!
Are you hiring in 2019?
Do you plan on bringing on any employees or contract workers? Make sure you consider any salaries, benefits, vacation – everything that goes into hiring someone. That includes hiring someone to help with payroll, if you don’t already! (Payroll taxes aren’t something to mess with.)
Now, get to budgeting!
You have everything you need to start creating a 2019 budget. Remember, it’s just a guess. Budgets will help you prepare for the upcoming year, but be willing to get flexible. It’s okay to go over budget (within reason), and it’s okay to come under budget. The important thing is having a budget to start with.
Deb Howard Greenleaf, EA, CEO and Principal, of Greenleaf Accounting Services provides virtual accounting and bookkeeping services and specializes in financial management to consultants, coaches, solo professionals, and other small business owners across the US. Deb is an Enrolled Agent (EA)—an IRS-licensed tax professional—and specializes in small businesses and entrepreneurs filing Schedule C or as an LLC. As an Advanced Certified QuickBooks ProAdvisor, Deb spends her day in QuickBooks Online and specializes in providing QBO support.
